Nonlinear Cournot and Bertrand-type dynamic triopoly with differentiated products and heterogeneous expectations

In a differentiated triopoly model with heterogeneous firms, the local stability of the Nash equilibrium under both quantity and price competition is analyzed. We find that the presence of a firm following a gradient rule based on marginal profits, and a player with adaptive expectations, determines the local stability of the Nash equilibrium, regardless the competition type, while the effects of the degree of product differentiation on the stability depend on the nature of products. Moreover, the Nash equilibrium is more stable under quantity competition than under price competition.